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State urges suspension of harbor trail project

LCCMR staff reviewing project after questions arise

Posted
Wednesday, July 10, 2019 3:56 pm

Marshall Helmberger

TOWER— The director of the Legislative-Citizens Commission on Minnesota Resources, or LCCMR, has told the city here to suspend work on the second portion of a two-phase trails project along the East Two River until it can review apparent discrepancies in the handling of the first phase of the project.

That revelation came at Monday night’s city council meeting as part of a report by Nancy Larson, who has stepped in to help administer city grants following the suspension of city clerk-treasurer Linda Keith. Larson described numerous issues related to the LCCMR grants, which totaled $1.279 million in two phases. “The project administration was not handled well,” said Larson.

Larson noted that Keith had failed to make any reimbursement requests on the $679,000 in first phase funding for the project, despite the fact that the LCCMR awarded the funds in 2016.

The city has since incurred more than $800,000 in expenses on the project, including just over $700,000 with Nordic Group, the Hermantown company that has nearly completed the project. The city also owes SEH $120,000 for engineering fees that were originally supposed to be included in the $679,000 budget for the first phase. That leaves the project about $150,000 over the anticipated budget.

But the bigger issue is the lack of an amendment authorizing substantial changes to the project, including the addition of decorative lighting, fencing, and a floating dock and boardwalk along the city’s harbor.

The redirection of funds towards harbor improvements came from funds that had been allocated for a half-mile long bituminous nature trail along the East Two River. City engineer Matt Bolf, of SEH, said the bituminous trail had met objections from wetland permitting agencies and so the city had planned to construct a shorter connecting route to the Hoodoo Point bike trail as part of the second phase of the project.

Bolf said Keith had told him that the LCCMR had approved the change in plans in a phone call, but neither the city nor the LCCMR appears to have any documentation of such a call. “Hindsight 20-20, we don’t have that in writing,” said Bolf. “We were going to make that part of the 2017 project, but it’s not well documented.”

Larson said LCCMR staff was currently reviewing their files for any record of a conversation with Keith that might have authorized the change in plans. “An amendment would be necessary in either case,” said Larson, who advised the council to ensure that future grants are processed according to the rules that apply. “Going forward, all grant agreements need to be read front-to-back to understand how they should be administered, because the LCCMR grant was not administered well, or at all, on the financial side during the three years the city had the funds,” said Larson.

Meanwhile, Larson said she is working to finalize the reporting for the first phase work on the LCCMR project and said the city won’t know for sure if all of the work completed will be reimbursable until the LCCMR staff review the report. “It could be reimbursed up to $679,000, but only if they agree to fund all the work,” she said. The original grant request did not include such items as decorative lighting and fencing or the floating dock/boardwalk.

Larson also updated the council on a number of other city grant projects that had been left unfinished by Keith, including the Lake Vermilion Cultural Center, the Main Street project, marina demolition work, and the Lamppa Manufacturing building. “A lot of these contributed to the cash flow problem,” said Larson, since in most cases the city had paid the bills but had not completed reporting needed to obtain reimbursement. Larson said she has since completed the reporting on those grants and that final funding on at least two of those projects, totaling between $80,0000-$100,000 has now been obtained by the city, with about another $65,000 still expected.

Financial condition

remains unclear

The recent grant reimbursements and other factors have boosted the city’s current cash balance to $394,331 as of Monday. “That’s up quite a bit from last month,” said interim city clerk-treasurer Ann Lamppa during her financial report to the council. Lamppa said she has been working with Diane Meehan and Dan Schultz to review the city’s financial transactions to better understand how the city’s finances have been managed.

Of particular concern, said Lamppa, was the frequency of interfund transfers made by Keith over the past several months. Lamppa said she has already documented more than 40 interfund transfers between Jan. 1 of this year through mid-May and she has yet to complete her review through the date of Keith’s suspension. “This is one place where mistakes have been made,” said Lamppa, who added that she could find no council authorization for any of the transfers, as is required.

To emphasize that point, Lamppa handed all the council members a copy of Chapter 25 from the League of Minnesota Cities Handbook, which details required and recommended financial practices for cities. On page six, the handbook states: “No interfund transfer should occur without council authorization by resolution.”

Lamppa also stressed that the council needs to take its oversight role seriously. “Because we are so small, we don’t have someone overseeing our work regularly,” said Lamppa. “That is why the council needs to be overseeing it.”